OT:MTJBKH: Some bedtime reading from what looks like a 4 year old article. That is the same time frame as the 3Com info I previously furnished. There just are no guaranteed or easy ways to make money in the market.
"There was another type of option that helped companies bolster results: put options on their own stocks that they sold to private investors. Through such deals, companies like Dell Computer, Microsoft and Intel were essentially betting that their stock prices would not fall below a certain level within a specified time. The investors who bought the options from these concerns, for example, paid for the right to sell the shares back to the issuer at the specified price. As these companies' share prices raced higher in the 1990's, sales of put options generated cash and never required the exchange of a single share of stock. Now, however, many stocks are below the so-called strike price of the put options, meaning that Dell and other companies may have to pay to buy back the shares covered by the puts at a higher-than- market price. In some cases, these purchases will require hard-earned cash that could otherwise be put back into the company's operations. Consider the obligations that Dell faces because of its put option sales last year. Dell pocketed $59 million in proceeds from option sales. But if the company's stock remains at its current depressed price of $25.63 until its put options expire by September of this year, the company will have to pay $1.06 billion if the options are exercised at the average price of the range noted in the company's filings. That figure is 64 percent of Dell's net income last year. Baruch Lev, an accounting professor at New York University's Stern School of Business, said: "I really don't understand why would they speculate in the stock market. What you want to do is have built-in stabilizers if the market goes down that would protect you automatically, not make it worse.""
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